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Nomura Holdings, Inc. (NMR)

F3Q2011 Earnings Conference Call

February 2, 2011 4:30 AM ET


Masafumi Nakada – CFO


Natsumu Tsujino – JPMorgan Securities Japan Co., Limited

Masao Muraki – Deutsche Securities Inc.

Mitsumasa Okamoto – Merrill Lynch Japan Securities Co., Ltd.

Shinoda [ph] – Morgan Stanley MUFG Securities Co., Ltd.

Azuma Ohno – Credit Suisse Securities (Japan) Limited

Shiyota [ph] – Daiwa Securities Capital Markets



Thank you for attending Nomura Holdings Q3 Financial Results Telephone Conference. This telephone conference will be conducted based on the financial results posted on Nomura Holdings webpage.

For those of you participating through the web, please take a look at the slides on the webpage. For those of you without the presentation material with you, please also look at our webpage.

Please note that this telephone conference contains some future projections based on Nomura’s forecast as of today. The actual results may differ significantly due to various reasons.

During the presentation, all of the phone lines will be muted. We will have a Q&A session following the presentation.

With that, we would like to start the presentation. Mr. Nakada, please go ahead.

Masafumi Nakada

Thank you, and thank you for participating in the telephone conference for our Q3 results for the year ending March 11. My name is Masafumi Nakada, the CFO.

First, I would like to go over the highlights. Please turn to page four. In this quarter, we were able to grow both in revenues and in pre-tax income. And as shown on the table on the right, we have grown for each quarter for the past following quarters.

Net revenue was Y295.9 billion, up 7% QoQ and up 8% year-on-year.

Pre-tax income was Y27.8 billion, 29% quarter-on-quarter and up 55% year-on-year.

Net income was Y13.4 billion, which was 13 times the previous quarter and up 31% year-on-year.

The pre-tax income of the business segments was Y40.8 billion, and we were able to grow our revenues and profits in all three business divisions.

The Retail Division booked revenues of Y97.5 billion, up 11 QoQ and pre-tax income was Y23 billion, up 1%. We saw well-balanced growth in our major products including equities and investment trusts and our client assets balance grew as well.

For the Asset Management Division, we saw an increase in AUM mainly in investment trust, and we booked revenues of Y21.4 billion, up 11% quarter-on-quarter; pre-tax income was Y7 billion, up 34%.

Wholesale Division revenues was Y172.2 billion, up 5% quarter-on-quarter; pre-tax income Y10.8 billion, up 41%. Within Wholesale Division for global markets, we continued to expand our business based on client flow despite the tough situation, and we saw revenue contribution from Asia and the U.S., and we saw revenue decline of only 2%.

For Investment Banking, we saw large ECM businesses in Japan as well as growth in the overseas businesses, and our revenue grew QoQ by 64%.

As of December end 2010, our Tier 1 ratio was 17.3% and Tier 1 common ratio was 17.1%.

Please turn to the table on page five, our cumulative figures after Q3. Under the tough situation following the European Sovereign Crisis in May, revenues were Y831.3 billion, down slightly by 5% year-on-year; and pre-tax income was Y55.8 billion, down 27%; and net income was Y16.8 billion, down 66%.

Based on the cumulative figures, our ROE or annualized ROE is 1.1%. But as of Q3, our ROE was 2.6%.

Please turn to page six. Here, we saw the breakdown of revenue by division, and as you can see on the pie chart on the right, domestic revenues were 57% and non-Japan revenues, 43%.

Let me go over the highlight for each of our divisions in Q3, please turn to page seven. First, the Retail Division, on top of the equity related businesses; we were able to sell a broad range of investment trusts and grow our revenues. Net increase in client assets was Y2.1 trillion and on top of this we saw an improvement in market conditions and our client asset balance grew from 68.1%, Y1 trillion from the previous quarter to Y72.3 trillion.

Please turn to page eight. Based on our focus on consulting sales and meeting our clients’ needs, we were able to achieve well-balanced growth in our major products. We saw strong trends in our sales of both domestic and overseas equities, we saw strong interests among clients in our high yield product as well as our equity-related investment trust, and we saw a sales growth.

Please turn to page nine. In our Asset Management Division, on top of the increase in AUM, we saw an increase in the – or an improvement in the performance-linked fees and that helped drive our revenues. We saw an increase in our funds in the publicly offered investment trust, and our AUM grew to Y24.1 trillion.

In the publicly offered investment trust market share, we continued our high or number one market share at 21.7%, and you can see this on the next page.

In the Investment Trust business, we expanded the number of funds investing in Asia. And in the investment advisory business, we continue to receive mandates for products from overseas investors for the Japan and Asia-related products.

Please turn to page 11. Let me explain about the Wholesale Division. In this quarter, we saw an improvement in the business conditions mainly in the ECM business for investment banking, but on the other hand for the bond markets. The market deteriorated in October and in November. We saw a reoccurrence of the Sovereign Crisis starting off in Ireland; and in December, we saw a sharp increase in interest rates in the U.S. So, for trading the market conditions continue to be tough.

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